Averting the old age crisis : policies to protect the old and promote growth.

This World Bank Report argues that, as the share of the world's old age population rapidly grows, systems providing financial security to the old are everywhere under increasing strain. Voluntary savings, market-based pensions, and reliance on family members are not adequate means of providing the financial redistribution, high savings rates, and insurance that are widely desired. Meanwhile almost all the world's government-run pension plans have deep flaws that threaten to constrict growth and have proven difficult to reform. Many systems (chiefly in Latin American and Eastern Europe) have promised unsustainably high benefits and are on the edge of ruin. The report concludes that a program mixing a mandatory publicly managed system (smaller than those currently operating in most countries), a privately managed mandatory savings system (similar to Chile's AFP system), and voluntary savings offers the best hope of protecting the elderly and promoting growth. The argument is convincing. By taking a global perspective, the report asks the right questions. Though the report exhibits a few eruptions of a paternalistic, technocratic bias, the authors combine relevant theory and abundant empirical evidence to fashion sensible answers to this looming crisis. All levels. R. M. Whaples; Wake Forest University